Before you refinance any mortgage there are certain terms you should consider. The same can be said about the FHA refinance loan. Any mortgage that you currently have on your property can be refinanced into an FHA loan. Refinancing your loan into a Federal Housing Administration loan provides you with a lower monthly payment, the ability to avoid foreclosure or default, or it can help with home repairs. The refinance loan is different than the FHA HOPE. FHA HOPE is a homeowners program that protects individuals from default or foreclosure only.
There Federal Housing Administration makes four types of refinance loans available to you.
• The Cash- Out refinance options allows you to refinance 85 percent of your home’s value. The value is determined by a professional appraisal with the FHA lender.
• A Cash- Out option of 95 percent of the appraised value.
• No cash- out
• Streamline FHA refinancing
There are requirements even with FHA refinance loans that you must adhere to. In the cash out options listed above the borrower is required to own the home for at least a year before applying for the refinance loan. For all four loans the amount you can obtain for refinancing will be determined by the homes appraised value. The calculation for non streamlined loans is a bit more difficult, and not really necessary to discuss other than to say the calculation has to deal with the original mortgage and any second mortgages you might have on the home.
FHA streamline loans can only be obtained if you have an existing loan loan. In this particular loan type you are not given cash, but the refinancing will pay the existing loan off. This option helps you lower your repayment amount in the event that the interest rates have decreased since you were awarded the first FHA loan. In the current economic climate the base rate has significantly decreased, allowing interest rates to decrease as well. For a person who acquired an FHA home loan during the housing boom it could be very lucrative for you to refinance.
The downside to refinancing in the current market is the home values. Many areas are suffering from degraded home values, presenting a situation of negative equity. This may limit your refinancing options. If your home value is still on the positive side under the streamline product, the Federal Housing Administration allows for the closing costs to be a part of the loan if the equity is sufficient.
If you are refinancing to an FHA loan there is no down payment required. This has been somewhat confusing for home owners. Since all FHA loans require a down payment, homeowners automatically assume this means the refinancing products as well. FHA refinance loans work like mainstream remortgages, thus there is no down payment in a refinance situation.
These refinance loans are available to any person who qualifies for an FHA loan. Most refinance products with FHA require that you go through the same qualification process as the regular FHA loan process.
By: J. Stewart
Posts Tagged ‘Fha Refinancing’
FHA Refinance Loan Qualifications – What You MUST Know Before Refinancing Any FHA Loan
January 4th, 2010FHA Refinance Loans and Credit Scores
December 22nd, 2009
One of the current major headline topics concerning mortgage refinance is revolving around the continued tightening by lenders. In fact, underwriting guidelines have become more restrictive by the month in 2008, including credit score qualification standards. The change to tougher lender guidelines is stemming from our national credit liquidity crisis and the continued decline in housing prices. With increased risk on the lender’s part, they are requiring a much cleaner loan application to fund loans.
What many people refinancing do not know, is that the squeeze in home loan qualifications are related to prime conventional home loans. FHA refinancing on the other hand, is a bit different, and guidelines are aimed to help as many homeowners refinance as possible. In years past, one could refinance into a decent interest rate with a 600 credit score and possibly finance 95 percent to 100 percent of their home’s appraised value. Those days are unfortunately gone for homeowners that can really benefit by a current refinance, if they choose to go the prime conventional route for their new mortgage. Fortunately, for many not qualified under a conventional mortgage, FHA refinance loans are filling the void.
An FHA refinance is not credit score driven, but there is a proverbial catch. Most lenders that underwrite and fund FHA refinance loans will require a 580 mid FICO score for eligibility purposes. Now, let’s be honest here, a 580 credit score is a pretty low score for the benefits of FHA refinancing. One of the many FHA loan benefits relate to the low refinance rates qualified for those with low credit scores. FHA interest rates are pretty much in line with equivalent mortgage rates offered to those with excellent credit scores. This is a huge advantage for those with poor credit. Another big benefit relates to how much a homeowner can finance, relative to the value of their home. Most FHA lenders will allow up to a 97 percent loan-to-value ratio. That means if your home is valued at $150,000, you can refinance up to $145,500 and still get low competitive refinance rates. In fact, many borrowers with great credit scores are going the FHA refinance route, as they are finding that interest rates are lower with an FHA loan as compared to the equivalent high loan-to-value conventional loan.
What’s more is that an FHA underwriter will listen to a borrower’s story relating to blips on their credit report. They will accept letters of explanation and supporting documentation aimed toward issuing a loan approval. In a day when is seems that numbers alone dictate a home loan approval or denial, it’s refreshing to see a refinance program that is more directed toward people and their needs.
By: Jim Bisnett